The Weekend Quiz – April 14-15, 2018 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

The distinguished economists just embarrass themselves

People are allowed to change their opinions or assessments in the light of new evidence. Diametric changes of position are fine and one should not be pilloried for making such a shift in outlook. Quite the contrary. But when the passage of time reveals that a person just recites the same litany despite being continually at odds with the evidence, then that person’s view should be disregarded, notwithstanding the old saying that a defunct clock is correct twice in each 24 hours. The US Congressional Budget Office (CBO) released its latest – The Budget and Economic Outlook: 2018 to 2028 (April 9, 2018) – and various commentators and media outlets have gone into conniptions over it. The economists that have responded – and they come with affiliations from both sides of US politics (although it is hard to differentiate separate ‘sides’ in the US anymore such is the demise of the Democrat Party) – have significantly embarrassed themselves. Their hysteria is not matched with the facts and they have been guilty of invoking these hysterical responses year-in, year-out for many years. A crack in a record, goes click, click, click, click and repeats ad infinitum. Sort of like the nonsensical arguments about US fiscal deficits that have appeared in the US press this last week.

Read more

The Left propaganda that the state is powerless – continues

When we published our latest book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World – last September, Thomas Fazi and I approached the UK Guardian to see if they would publish an Op Ed by us summarising the main arguments presented in the book. We received no response. Pluto tell us that the book is one of their better sellers since it was published. And it is not as if the topic is irrelevant in the Guardian’s assessment. That is clear from the fact that on April 5, 2018, they published one of their ‘long read’ articles by Rana Dasgupta – The demise of the nation state – which is a direct refutation of the ideas advanced in our book. This ‘long read’ also falls into the same traps and analytical errors that we point out has besotted the Left side of politics since the 1970s. The article is clearly part of the Guardian’s agenda to appear progressive but, in fact, be anything of the sort. As I have noted previously, the Guardian seems content to publish a torrent of anti-Brexit articles and criticisms of Jeremy Corbyn rather than provide any semblance of balance.

Read more

The Weekend Quiz – April 7-8, 2018 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

Latest Europhile advocacy beggars belief – surrender sovereignty to regain it

Today, I have a lot of travelling coming up. So time is tight. Regular readers will know my views on the Eurozone. I have held those views since the late 1980s when I was a young lecturer. Nothing has changed to change my opinion. It is an unmitigated disaster. And, in the face of all evidence to the contrary, the Europhiles on the Left and the Right continue to put out propaganda trying to defend their monstrosity. Here is a selection of the latest input from the elites on how the EU is the salvation of democracy and sovereignty and yet Eurozone Member States are to be treated like high risk car drivers – paying more for a pittance of fiscal protection from the technocrats. It really beggars belief.

Read more

My response to a German critic of MMT – Part 3

This is the third (and final) part of my response to an article published by the German-language service Makroskop (March 20, 2018) – Modern Monetary Theory: Einwände eines wohlwollenden Zweiflers (Modern Monetary Theory – Questions from a Friendly Critic) – and written by Martin Höpner, who is a political scientist associated with the Max-Planck-Institut für Gesellschaftsforschung (Max Planck Institute for Social Research – MPIfG) in Cologne. Today, we will discuss inflation and round up the evaluation of his input to the debate. The overriding conclusion is this. As a researcher, I am instinctively driven to dig deep before I make public comment. It is easy to think you have an idea that is novel and then venture forth with it. One usually finds, fairly quickly, once you start digging into the literature, that the idea is anything but novel. Modern Monetary Theory (MMT) has been around for around 25 years now (give or take) but has really only gained traction in this era of social media (blogs, tweets, YouTube, etc). Many of the issues raised in the Makroskop article have been covered extensively over the last 25 years. Many academic and non-academic articles have been written by us on these issues. Thus, if my response here is not sufficient, then I urge readers to consult the massive literature we have built up for further clarification.

Read more

The Weekend Quiz – March 31-April 1, 2018 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

My response to a German critic of MMT – Part 2

This is the second part of my response to an article published by the German-language service Makroskop (March 20, 2018) – Modern Monetary Theory: Einwände eines wohlwollenden Zweiflers (Modern Monetary Theory – Questions from a Friendly Critic) – and written by Martin Höpner, who is a political scientist associated with the Max-Planck-Institut für Gesellschaftsforschung (Max Planck Institute for Social Research – MPIfG) in Cologne. In this part we discuss bond yields and bond issuance. I had originally planned a two-part series but the issues are detailed and to keep each post at a manageable length, I have opted to spread the response over three separate posts. In Part 3 (next week) we will discuss inflation and round up the evaluation of his input to the debate.

Read more

Corporate Australia – the mendicants who want more!

Over the last few months, we have had the Australian Treasurer clogging up the media with his relentless claims that Australia has no choice but to cut corporate tax rates to keep up with the rest of the world (this is after Donald Trump started the ball rolling). The Federal government is trying to eliminate the resistance in the Senate (Upper House) to their proposal to cut corporate rates from 30 to 25 per cent. The Treasurer is a really pathetic figure – a non-economist, mouthing platitudes over and over about matters that he has little understanding and which the research evidence doesn’t support anyway. Then, last week, the ultimate public purse dependents, big business sent the members of the Senate a letter (a sort of blackmail letter) claiming if the Senators stopped blocking the legislation, then their corporations would go on an investment, wage increasing, employment creating binge. It was sickening to read and listen to. These mendicants are trying to convince us that the only thing stopping an investment boom or wage increases is a 5 cents in the dollar tax impost that tax data reveals many of them don’t pay anyway. It was hypocrisy parading as blatant self-interest. These characters have no shame.

Read more

My response to a German critic of MMT – Part 1

Makroskop is a relatively new media publication in Germany edited by Heiner Flassbeck and Paul Steinhardt. It brings some of the ideas from Modern Monetary Theory (MMT) and other analysis to German-language readers. It is not entirely sympathetic to MMT, differing on the importance of exchange rates. But it is mostly sympathetic. I declined to be a regular contributor when invited at the time they were starting the publication not because I objected to their mission (which I laud) but because their ‘business model’ was a subscription-based service and I consider my work to be open source and available to all, irrespective of whether one has the capacity or the willingness to pay. But I have agreed to contribute occasionally if the material is made open source, an exception to their usual material. Recently, the editors approached me to respond to an article they published from a German political scientist – Modern Monetary Theory: Einwände eines wohlwollenden Zweiflers or in English: Modern Monetary Theory – Questions from a Friendly Critic. The article constitutes the first serious engagement with MMT by German academics and thus warrants attention. Even if you cannot read German you will still be able to glean what the main issues raised in the German article were by the way I have written the English response. The issues raised are of general interest and allow some key principles of MMT to be explicated, which explains why I have taken the time to write a three-part response. Today is Part 1.

Read more

The Weekend Quiz – March 24-25, 2018 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

Eurozone policy failures laid bare

On March 13, 2018, the OECD released its latest Economic Outlook with accompanying “Interim projections” as at March 2018) suggesting that the current growth phase will continue through to next year as consumer and business confidence improves and translates in higher investment rates. The OECD, however, forecasts that growth in the Eurozone will decline over the next two years. The major Eurozone nations (France, Germany and Italy) are not witnessing the growing investment expenditure. The Eurozone might be seeing a little sunshine creeping out from the very dark clouds. But it is far from recovered and the future is ominously black. Key cyclical indicators remain at depressed levels, which means that when the next cycle hits, the Eurozone will be in a much worse position than before. And the reason: the fundamentally flawed design of the monetary system with its accompanying austerity bias. The reform required is root-and-branch rather than a prune here and there.

Read more

The Weekend Quiz – March 17-18, 2018 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more

US labour market – strengthened in February but still not at full employment

On March 9, 2018, the US Bureau of Labor Statistics (BLS) released their latest labour market data – Employment Situation Summary – February 2018 – which showed that total non-farm employment from the payroll survey rose by 313,000 in February. The Labour Force Survey data also showed a relatively strong net employment gain (785 thousand (net) jobs were created) in February 2018. The labour force was estimated to have risen by 806 thousand with participation rising by 0.3 points. The BLS thus estimated that unemployment rose by 22 thousand and the official unemployment rate was unchanged at 4.14 per cent. There is still a large jobs deficit remaining and other indicators suggest the labour market is still below where it was prior to the crisis. Finally, there is no evidence of a wages breakout going on. Taken together, while the US labour market has strengthened in the first two months of 2018, it is still some distance from being at full employment.

Read more

Workers’ parties in NZ and Australia compete to be the most neoliberal

The Italian elections were held last Sunday (March 4, 2018) and the results are devastating for the Europhiles that think that the EU and the Eurozone, in particular, can be reformed to bring the people together in some sort of democratic paradise. Anti-establishment parties including the far right Lega Nord (who want to expel all migrants) have made spectacular gains. This follows elections in several nations where rather extreme results have emerged. What is apparent is that social democratic parties have started to lose electoral supports in large swathes and, in some, cases are now diminished and ruined forces. After hearing what the Shadow Treasurer in Australia said yesterday I can only hope the same electoral whitewash of the Australian Labor Party occurs at the next election. The message from the various national elections is pretty clear. Voters have seen through all the neoliberal nonsense that they have been bombarded with over the last decades and the miserable actual outcomes that have followed in terms of things that matter for peoples’ prosperity – jobs, real wages growth, income security, public services and infrastructure etc. They are sick of seeing the top-end-of-town walk off with the largesse while government’s attack the poorer elements in the name of ‘budget repair’. The neoliberals have pushed their luck to far. Sunday’s Italian result is just part of the evidence mounting to support that view. But, back in the Southern Hemisphere the Labour government in New Zealand the Labor opposition in Australia do not seem to have understood the trends. They are still thinking it is clever to ape the neoliberal nonsense about fiscal surpluses, AAA credit ratings and war chests to help fight future recessions. Sad sad sad.

Read more

The New Keynesian fiscal rules that mislead British Labour – Part 3

This is Part 3 (and final) in the series which examines the robustness of claims made by two British academics about the desirability of the British government (particularly Labour) adopting further fiscal constraints on their flexibility to advance well-being in that nation. Part 3 further develops the critique and focuses on the validity of tightening voluntary constraints on government and outsourcing key parts of the fiscal policy development process to so-called ‘independent’ fiscal councils or boards. We conclude that these suggestions would further entrench the neoliberal dominance of government policy and reduce its capacity to serve the wider interest. In effect, taking this sort of advice would be counterproductive for British Labour, which really needs to to further break out of its recent Blairite neoliberal past and present a truly progressive manifesto to the British people that will force the Tories to move closer to the centre and squeeze the extreme right-wing elements. This will require more than articulating progressive-sounding social and environmental policies. It will require more than proposals to renationalise the railways. Effectively, British Labour has to reframe the macroeconomic debate and eschew the sort of reasoning that the mainstream of my profession offers. It must, in my view, embrace Modern Monetary Theory (MMT) principles to free itself from the shackles of all the neoliberal mumbo jumbo that the New Keynesians continually offer as economic verities. The reality is the the New Keynesian approach has one output – an elaborate litany of lies.

Read more

The New Keynesian fiscal rules that mislead British Labour – Part 2

This is Part 2 of my Three Part exposition of how the standard New Keynesian approach to the specification of fiscal rules will generate poor advice for politicians desiring to achieve progressive socio-economic goals. The paper I am using to represent the New Keynesian approach has, by all indications, been somewhat influential in the formation of the macroeconomic approach currently being espoused by the British Labour Party. In that sense, the critique aims to disabuse the Labour politicians and their apparatchiks of building policy options based on fake economic knowledge, and, instead, embrace the principles of Modern Monetary Theory (MMT), which provides an accurate depiction of how the monetary system actually operates and the policy options for a currency-issuing government such as in Britain, and the likely consequences of deploying these options. The one major lesson that comes out is that the New Keynesian approach is an elaborate fraud. It plays around with so-called ‘optimising’ models asserting human behaviour that no other social scientist believes remotely captures the essence of human decision-making, and then derives conclusions from these models that are claimed to apply to the world we live in. Prior to the GFC, these ‘models’ didn’t even consider the financial sector. The fact is that nothing of value in terms of specifying what a government should do can be gleaned from a New Keynesian approach. It is barren.

Read more

The New Keynesian fiscal rules that mislead British Labour – Part 1

The British Labour Party is currently leading the Tories in the latest YouGov opinion polls (February 19-20, Tories 40 per cent (and declining), Labour 42 per cent (and rising). They should be further in front, given the disarray of the Conservatives as they try to negotiate within their own party something remotely acceptable about Brexit. When there is this degree of political capital available, in this case for the Labour Party, a party should use it to redefine policy agendas that have gone awry. To build a narrative that will advance their cause for the future decades. British Labour has a chance to break out of its recent Blairite neoliberal past and present a truly progressive manifesto to the British people that will force the Tories to move closer to the centre and squeeze the extreme right-wing elements. In part, under Jeremy Corbyn and John McDonnell, Labour is making progressive noises on a number of fronts. But ultimately, where it really matters – the macroeconomic narrative – they are remaining firmly neoliberal and this will blight their chances of pursuing a truly progressive agenda. One of the glaring mistakes the Labour Party has made is to accept advice from neoliberal economists (so-called New Keynesians) who have instilled in them a need for fiscal rules. This is a three-part analysis of the sort of advice that Jeremy Corbyn and John McDonnell are getting and why they should ignore it. I have split it into two parts because it is long and quite involved at times.

Read more

Snowbound in the North

I am now in Europe (just) and will be here for the next two weeks. Next weekend, I will be speaking at some events in Barcelona and I will circulate details when I know more. This week I am giving three lectures at the University of Helsinki as part of a new postgraduate course they are offering. Tomorrow through Thursday, I will publish a three-part blog post series on The New Keynesian fiscal rules that mislead British Labour. I am examining the input from the academy that has clearly influenced decisions taken by the British Labour Party leadership in recent years. It is influence that they should have ignored. The fundamental principles that underpin the New Keynesian approach to macroeconomics do not form a suitable basis for a progressive socio-economic policy agenda. While that approach concedes that in the short-run fiscal policy can be used to ‘stabilise’ a recessionary situation, the overall advice is that austerity then has to be imposed to ‘smooth’ tax burdens on future generations and minimise public debt. The tax burdens arise because they claim taxes fund government spending and the public debt oscillations arise because they claim the government relies on debt issuance to fund the deficits that are required to meet short-term emergencies (war, recession etc). It is a jumble of gobbledygook hiding behind the precision of some simple mathematics. The latter, though, while held out as a rigourous ‘authority’ to back up the policy claims, is, in fact, incapable of providing definitive determinations of what is best for Society. It is an elaborate sham my profession inflicts on the debate. Anyway, a three-part series is coming up.

Read more

The Weekend Quiz – February 24-25, 2018 – answers and discussion

Here are the answers with discussion for this Weekend’s Quiz. The information provided should help you work out why you missed a question or three! If you haven’t already done the Quiz from yesterday then have a go at it before you read the answers. I hope this helps you develop an understanding of modern monetary theory (MMT) and its application to macroeconomic thinking. Comments as usual welcome, especially if I have made an error.

Read more
Back To Top